Navigating the disposition of trust-owned timeshares and vacation properties can be surprisingly complex, often presenting unique challenges that many estate plans overlook. These assets, while seemingly straightforward, can quickly become a source of frustration and expense for both trustees and beneficiaries if not addressed properly within the trust document. Understanding the nuances of ownership, maintenance fees, and potential resale options is crucial to ensuring a smooth transition and maximizing value for the trust’s beneficiaries. Many people assume these properties will simply transfer like other assets, but the realities of timeshare contracts and vacation property regulations often necessitate a more careful and strategic approach.
What are the biggest challenges in dealing with trust-owned vacation properties?
One of the most common hurdles is the ongoing financial obligation of annual maintenance fees. Unlike traditional real estate, a timeshare doesn’t generate rental income to offset these costs. The trust is legally responsible for these fees even after the grantor’s passing, creating a continuous drain on trust assets. Furthermore, selling a timeshare can be notoriously difficult, often requiring substantial discounts to attract a buyer. This decreased value, coupled with the time and effort required to manage the sale, can significantly erode the benefit to the beneficiaries. Many timeshares are also subject to restrictive resale rules outlined in the original purchase contract, potentially limiting the options available to the trustee. According to the American Resort Development Association (ARDA), the secondary market for timeshares is often volatile, with resale prices frequently falling far below the original purchase price. It’s estimated that over 85% of timeshares on the resale market are listed below $1,000.
Can a trustee simply sell the timeshare or vacation property?
Generally, a trustee *can* sell the timeshare or vacation property, but they are bound by the terms of the trust document and the California Prudent Investor Act. This act requires trustees to act with reasonable care, skill, and caution when managing trust assets, meaning they must consider the current market conditions and potential risks before making a sale. They must also document their decision-making process to demonstrate they acted in the best interests of the beneficiaries. A trustee can’t simply liquidate an asset at a severely discounted price without a justifiable reason. Furthermore, the trustee must consider any potential tax implications of the sale. For instance, if the timeshare has appreciated in value, the trust may be subject to capital gains taxes. It’s vital that the trustee adheres to the “California Prudent Investor Act” when making decisions on managing these investment assets.
What if the beneficiaries don’t want the timeshare?
This is a common scenario, and often the most challenging. If the beneficiaries have no interest in using or maintaining the timeshare, forcing them to accept it as part of their inheritance can cause resentment and potential legal disputes. The trustee should proactively communicate with the beneficiaries to understand their preferences and explore all available options. These options include attempting to sell the timeshare, donating it to a charity (if the charity is willing to accept it), or even engaging a timeshare exit company to help terminate the contract. However, these exit companies often charge significant fees and may not be successful. I remember a client, David, whose mother had left a timeshare in Florida to him and his siblings. None of them wanted it, and the annual fees were a burden. After months of frustration and failed attempts to sell it, they finally hired a reputable exit company, but it cost them several thousand dollars. This situation underscores the importance of addressing these assets proactively within the estate plan.
How can an estate plan proactively address trust-owned vacation properties?
The best approach is to address these assets *before* they become a problem. The trust document should specifically outline the trustee’s authority to sell, donate, or abandon trust-owned timeshares or vacation properties. It should also provide clear guidance on how to handle ongoing maintenance fees and any associated expenses. A well-drafted trust can even authorize the trustee to proactively terminate the timeshare contract *during* the grantor’s lifetime, avoiding these issues altogether. I recently worked with a client, Maria, who was concerned about her timeshare. We included a clause in her trust allowing the trustee to terminate the contract and pay any associated fees from her estate. This provided her with peace of mind, knowing that her family wouldn’t be burdened with this asset after she was gone.
43920 Margarita Rd ste f, Temecula, CA 92592At The Law Firm of Steven F. Bliss ESQ., we understand the complexities of estate planning and the importance of addressing all types of assets, including trust-owned timeshares and vacation properties. Our experienced attorneys can help you create a comprehensive estate plan that protects your family and ensures your wishes are carried out. Steven F. Bliss ESQ. can be reached at (951) 223-7000. Don’t let a seemingly minor asset create major headaches for your loved ones.
Don’t leave your estate plan to chance. Contact us today for a consultation and discover how we can help you create a secure future for your loved ones. Let us handle the complexities so you can enjoy peace of mind.